In an interview to CNBC-TV18, Dipan Mehta, Member of BSE & NSE shared his readings and outlook on specific stocks and sectors.
Sonia: Just wanted your views on some of the auto ancillary spaces like tyres where things are picking up both on the raw material front as well as now talks of anti-dumping duty, etc. is this a space that you see a large amount of returns even from these levels?
A: The way the auto industry has been doing in India, are not just the two wheelers, but four wheelers as well as commercial vehicle, I think a lot of opportunities have opened up for domestic auto ancillary manufacturers and many of the auto ancillaries manufacturers also have good export business as well, the likes of say Bharat Forge or Motherson Sumi for that matter. The global auto industry also is doing pretty well where Indian auto ancillary companies are gaining market share. So, generally very positive on the auto ancillary industry. In a way it kind of when you go to the auto original equipment manufacturer (OEMs), there is always the risk of the model failing or some company doing better than the other.
When it comes to auto ancillary those risks are not there and in that respect auto ancillary also should do as well perhaps as the OEMs and valuations I think are still reasonable compared to the auto OEMs. So, very positive on the auto ancillary industry, but one needs to be a bit selective and go for companies where growth rates have been higher and are in areas where the auto industry per se is increasing its content as far as the models are concerned. So, be a bit selective, but I think very positive on the auto ancillary space.
Sonia: Idea Cellular now has moved up almost about 5 percent odd. The news flow is out, we don’t know the exact price. All we know is that AB Group can buy 9.50 percent stake at Rs 1.30 per share, but how would you react to the Idea stock today?A: I think the merger was inevitable and the way the Idea stock has moved I think it is great opportunity for long-term investors to exit out of Idea even if there are three players and few other miscellaneous players the disruption and the competitive intensity will remain extremely strong. As these companies try and gain market share, the expense of reducing their rates it will definitely have an impact on their return on investments and going forward I think it is going to be very challenging for these companies.